Top Tax Saving plans Strategies

Paying taxes is relatable to every earning person. Being a necessary evil, taxes are what help run the economy, much as you’d like to evade them completely. However, the government was kind enough to offer a variety of tax saving strategies as a concession. According to section 80C of the Income Tax Act, a sum total of 1.5 lakh rupees may be invested in all these put together so that the same amount may be deducted from your taxable income. We all know that the simplest way to avoid excess tax payments is to pay on time to avoid interest building up on it. For this purpose, there are tax saving strategies which include the following methods:

•             Your best bet is to invest in a public provident fund (PPF) as it guarantees 8.7% tax free compound interest per annum. With a maturity period of 15 years which can be extended to 25, this is a viable source of retirement funds. You could also choose superannuation funds as a pension plan.

•             Investing in tax-free bonds, NSCs (National savings certificates) and ELSS (Equity Linked Savings Schemes) are all profitable from the point of tax savings.

•             Get tax deductions on life insurance policy of any one of your immediate family members. However, only if premium is less than 10% of the assured sum for all the years will you be able to avail this benefit.

•             If you are physically or otherwise disabled, you are liable to receive a tax deduction of up to INR 50,000 on your taxable income. If you are suffering from two different disabilities, you are eligible to receive a tax deduction worth INR 1,00,000 provided you have sufficient proof.

•             Save money while creating assets such as a house. You can save money on a second home if you rent it out. This is because you can avail a deduction for interest on the loan.

•             Involve your family members in a business you run in order to reduce your own taxable income. This puts you in a lower income category while also providing you the tax deduction benefits of your family members. Hence, the total tax paid by your family will be reduced.

•             Choose Saving Plans that do not cause clubbing of your children’s income with yours or gift an education loan to your children to reduce taxes incurred.

How to save enough for family’s secured financial life?

Life is a beautiful picture until you come across the tornado of emergencies, which can shatter your happy life if you don’t have enough savings in hand. Every person faces some or the other emergency at some point of time in life. These emergencies can be tackled by building sufficient corpus over the years under a dedicated effort known as “savings plan.” Saving is a good idea. Every person sets certain financial goals such as long or short term. Depending upon their needs, income source and future projections everyone can work upon saving plans for balanced life. You don't need a big income to save for the things you want in life.

The article gives few tips on working upon your best saving plans to produce healthy corpus to lead financially secured life.

Goal Identification

Make a list of all the things you want to save for. It could be a new house, car, child education, retirement fund anything under the sun. Start off with all your dreams and narrow them down with the priority ones. Remember the more savings goals you have, the more a comprehensive savings plan will help you stay on track to pursue them.

Cost Determination

Next would be figuring out the costs to fulfill your financial goals. These could be loans or one time payments including all the costs such as foreign trips, hospitalization, buying a car or a house, etc. Once you come to consensus on cost involved use saving plans calculators to decide your premium costs.

Target Date

Once you determine the costs and financial goals next would be to assume the time needed to fulfill your wishes. For short term goals which are year or two away, consider keeping your savings in a low-risk savings account that protects your money. For longer-term goals, you may consider investments such as stocks or mutual funds, since a longer period can give you timeframe to recover from stock market fluctuations. When you get closer to your goals it would be good idea to transfer more of your investments to lower-risk savings products.

Calculations

Once you determine these factors divide the total cost of each of your goals by the number of months you want to wait and add them up to see how much you need to save every month. If you want you can use saving plans worksheet to help figure out your monthly savings target.

Adjustments

Best saving plans need a lot of market knowledge, permutations and combinations, and adjustments accordingly to market movements. Compare the monthly target from your savings spreadsheet to your current rate of savings. If you're not saving enough you can increase savings by cutting monthly expenses. Alternatively, adjust your goals, either by removing less important ones or by postponing the goals in future. Savings spreadsheet makes it easy to revise your savings goals until you make necessary financial arrangements.

See Savings grow

Keep a tab on money invested in funds every quarterly. Not only will this help you stick to your personal savings plan, but will also help you identify and fix problems quickly. Besides, seeing your money grow generally boosts your confidence and you tend to take a decisive approach to build best saving plans and hit goals faster. When you have set up your long term savings plan, you'll be building up a good reliable cushion that can add up to future financial security.